Your mortgage broker is basically a salesperson trying to get you to borrow more money lol. That said, he's not wrong about the math if you actually invest that 34k instead of just letting it sit there

With only 33k in your 401k at 40 though, I'd probably go with option 2 and actually invest the difference. You're way behind on retirement savings and need that money working for you. The 6.125% rate isn't terrible but it's not great either - you can probably beat that in the market over time

Just make sure you actually invest it and don't blow it on a new truck or something

Mortgage broker is biased to a lower down payment as likely gets a comission based on your loan size.

He's not entirely wrong, however a 6+% mortgage is guaranteed returns, which is tough to beat after taxes in the market. Typically anything over 5% is considered high enough to pay down early, depends on your confidence in investing.

You clearly weren’t comfortable investing before when you had no debt (that we know of) but now you are considering taking out more debt at 6.125% and investing?

Bad idea. You’ll likely panic and sell at the bottom.

Just put $100k down and keep the rest as an emergency fund.

Then increase your 401k contribution percentage going forward.

I’ll be honest with you, I think this decision is an important inflection point for you. Unless you have confidence in a large wind fall of money later, with only $30k in your 401k at 40 you can either: take the $130k you have and invest in a broad market index fund while focusing on retirement and likely be able to catch up then buy a house when your retirement trajectory is on track. Or, you buy a house now and very likely remove yourself from retirement without a dramatic change in financial situation.  

It’s a high enough rate that there’s not a clear right or wrong answer, so maybe you just want to split the difference. 20% is nice because you dont pay PMI, using your full 135k would be a out 40%, so solit the difference and do 30% ~100k down.

I'm going to assume that the 135K you have does NOT include your emergency fund and you have separated those out either mentally or actually. If the 135K includes your emergency fund. You do not have 135K for the house. You have 135K less your emergency fund.

First off his math is about technically right given some fudge factors. If you do 20% to the loan, you skip the PMI. Which given how much you've saved and prepared for this house. I would advise that your minimum down payment should eliminate the PMI and for sure go no lower than that. If you put the 34K in a market tracking fund. Sometime around the 15-20 year time horizon... the amount you'd pay down from the loan would likely match the principal remaining and you could pay it off. Probably not with the 50K left over unless the market does slightly above average. But close. He's not far off. Realtors tend to like arbitrage situations in my experience.

Buying and selling a home is extremely expensive. There's common recommendations that you shouldn't buy unless your going to stay there for 3-5 years. Because it usually takes around that long just to recover from the purchase. It also depends on exactly what your plans are with this house. If you plan on remolding. If you plan on buying a truck that you otherwise wouldn't have purchased. Any cost you wouldn't have paid for in your previous situation you did pay for in the new house is a cost of owning that home. And you don't really get that back unless you down grade the house. This isn't to say that home ownership is a bad idea. It's to say that if you have a lot of plans for this house, it can take more than 5 years to financially recover in actuality. And my point is.... if your going to buy a home. You should think of that as a longer term purchase. Forget what the averages are. What is your goal with the home? (rhetorical)

Again. I'm not saying you can't sell and move. I'm just saying the more you do that, the more harmful it is on your finances. And with you entering in your 40's. You still have time until 67. It's almost 30 years away. But.. your getting to that point where your financial health would benefit in some concept of stability. A lot of this depends on your net worth. If your networth is 5M, then a 2% market gain is 100K and you just recovered from the purchase practically instantly and my point is a bit moot. If your networth is more like 135K, then everything I said above applies directly to you. I mean one of the biggest perks for a home is to have it paid off. Evening meal tastes different when you own your own home. Going to work is completely different when you have a paid for house.

You need to figure out what you would like your next move to be. If you are planing on this being a short term ownership. Then I would likely advise to do a down payment enough to erase the PMI, but enough to keep your payment lower. So maybe more in the middle. The intention being is if you plan to move, you will need to do this over again and save for another down payment. Unless you plan on getting creative on juggling homes. But really what your after is a break even analysis. You take all the approaches to this financial decision your likely to actually do. Then work them out to the same time horizon. Say 20-30 years in the future. Then compare them and make a decision.

If you do a bit of math on this if you were to stay there for 20 years. If you did his recommendation.. mathematically. Your payment would be ~1.6K less escrow. You would put your 34K in for 17 years. In 17 years your investments should approximately equal your principal within a reasonable percentage. You should be able to pay it off then. If you then took that 1.6K back into investments. This would mean your networth would grow to ~66K plus the end value of the house. If you did all 135K down.. your payment would be ~1.2K less escrow. If you paid the 1.6K instead. You would pay off the house in 16years. So your net worth would be fairly similar. If you instead.. just paid the 1.2K and put the ~400 in the market. You could eventually use that to pay it off in about 14 years. Probably giving yourself a little more.

Out of curiosity, why buy a house that you’re contemplating staying in for 6 ish years? The cons seem to outweigh the pro’s after throwing away that 20-40k in realtor fees at both ends of those sales and potential/likely maintenance costs.

Get a 15yr mortgage at lower interest rate with 20% down and refinance if rates come down

Invest, as long as you think you can beat the mortgage rate. I had a similar decision recently and went with investing instead of bigger down payment. Happy I did as I’ve already made up the interest and then some. I’m very familiar with markets though which is a consideration.

I would go for the lower down payment and invest, especially increasing your 401k contributions. You have a decent amount of cash but your retirement is lacking for your age.

Historically, the market outperforms real estate and beats the interest rate you're getting.

You'll need the money for emergencies, furniture and house expenses!

20% is enough to avoid PMI and keeping more $$ will generally give you more flexibility if you're responsible with how you invest it. The only reasons that I'd do more are if 1) I don't have confidence that I will make more than 6.125% in the market, 2) I don't think I'd be responsible with the $$.

20% is plenty for a down payment!

Save the money left over, the first two years of home ownership you will have lots of repair projects you want to do.

Your retirement seems very behind schedule for someone your age.

Your 401k is low for 40 years old. Your first step for investing should be to increase your contribution. 6+ % return from investing is possible if you know what you are doing. Even if you buy the safe etf everyone suggesting you, Murphy’s law will act the moment you buy it and good chance it will drop for short term. Since you have less investment experience, you may panic or regret. Maybe play safe and do 50/50.

135k on cash is brutal. I got about 4k in my savings and I'm feeling some way about that. My money must always work.

At a 6.125% mortgage rate, a larger down payment is effectively a risk-free 6%+ return, which is hard to beat—especially over a shorter 6–7 year ownership horizon. Since you’re unlikely to stay 20 years, the broker’s math is optimistic and ignores selling costs, taxes, and sequence-of-returns risk. Investing the $34k only really wins if markets cooperate and you stay long enough. A reasonable approach: Put more than 20% down (something like $80–100k). Keep a healthy cash buffer. Then prioritize steady investing going forward (401k, IRA) once you’re settled. Lower monthly payments = more flexibility if you move, lose income, or want to invest later. Given your limited retirement savings at 40, long-term investing matters—but not at the cost of locking yourself into a higher fixed expense today. I’d lean toward the bigger down payment unless you’re very comfortable with market risk and higher monthly obligations.

Realistically most people move within 7 years.

Assuming some appreciation with the property, you can likely break even selling the house in the future.

Assuming you break even, you can look at that as basically having free rent for several years.

Wouldn't you rather be building up your nest egg and retirement with the extra money in the market?

Also, while the broker likely has other incentives, the math isn't wrong. If you do end up staying in the house 20 years the market investment is a better one. Additionally, you can write your mortgage interest against your income on your taxes. Depending on your income that can be quite helpful.

The other question would be, if you think you might move or could move. You could consider putting more into the market and continuing to rent.

What the broker is referring to is that the s&p 500 avg return is 10.5% going back to 1957. There are losses some years or even decades, but there are also larger gains in years. But with compounding 10% returns and reinvested dividends you will be far ahead. The longer it stays in the fund the larger it grows. Additional, once you are above $150k you can borrow against the value, up to 70% of the fund value. This avoids any capital gain taxes and you pay minimal interest, mine is 6% interest only at the moment. In terms of when you sell your house, it's going to cost you at least 6% between closings costs and realtor fees. You most likely will also be itemizing your deductions so you are paying 6% of deductible interest to earn 10+% return on your portfolio. I put 15% down pmi is pretty cheap at that level, and took slightly higher rate 3.41% in my case to avoid all the closing costs. That money that I saved went in the market and has doubled in the 4 years since I bought the house.

30% down gets you the most favorable loan terms (assuming 800+ score.)

I’d do that personally but sounds like you shouldn’t go above 20 and then keep the rest working for you.

Depends on the housing market in your area. If you expect to make a profit when you sell, then put down as much as you can now and enjoy lower monthly payments. We put 110K down when we built our home for 250K. Its now worth around 600K. Owning a home is still one of the best investments…for now. It will eventually regulate itself. My gut feeling is you are on the tail end of this crazy market. Take advantage of it.

I wouldn’t put more than 20 percent down if you know you are going to move anyway in 7 ish years…

That’s like investing in your home and waiting for the return in 7 years and housing market has ups and downs…

Invest the rest. Keep a nice liquid HYSA and invest rest- preferably starting in an IRA, I would advise Roth. Also keep contributing to that each year.

Don’t forget closing costs! I’m in a different geographical area so it might be more expensive, but I’m planning for around $10k in closing costs, on top of 20% down, plus a hefty emergency fund, because Murphy’s Law says everything will break within the first year of purchase. 

I'd do 20% down and invest the difference. Less than 20% PMI will cost you more than investment returns. You can always pay extra on the mortgage if you decide to later on.

If the payment is comfortable for you, I’d put a smaller down payment and then get aggressive with retirement investing.

20% down with closing fees -70k

Emergency fund (cadhband cds) - 25k

Invest the rest - 40k

Start to pay down your mortgage as income rises.

Do people take HELOCs or cash out refinances to put that money in to the stock market?

Generally, no.

As a rule, put the cash in to the house.

You’ll have room to invest with your lower monthly payments.

Research dollar cost averaging (DCA). It typically returns better than making fewer, larger investments. By making a larger down payment now and investing more in the future, you're effectively DCA'ing more vs a lump investment.

Also, the security of owning more equity in your home with a lower monthly payment is hard to beat.

If mortgage rates were lower and the market hadn't had a crazy run up in equities and real estate the past 4 or 5 years... I'd say otherwise, but current environment says larger down payment now.

Only other thing I'd worry about... you're 40 and only have $33k in retirement savings? Will you be diligent enough to contribute more going forward?

What makes sense is location and hidden cost.

Closer to work and shorter commute is worth something to you. Maybe estimate $200 per hour just to see the monthly cost difference in locations. 30 minutes a day is 10+ hours of stress each month.

You don't mention kids, so have you considered that aspect? People either want to live around more kids or they don't want squeaky kids running around at all hours of the weekend morning. So check out the neighborhood earlier on a non-school day to see if it still makes sense.

Rent usually looks about the same as mortgage, but get a bot to help you estimate total costs. Car insurance is usually higher in an urban area. Home insurance and taxes grow faster than you think they will. Repairs to a 30-yr old furnace or roof are a risk.

Throwing parties costs more in a house, you have more friends and you get to do more with them, but your family can visit. So, tradeoffs.

If your home was paid off would you borrow against it to gamble in the stock market?

Pay off the house as fast as you can. You will always need one. 100% of foreclosures have one thing in common, a mortgage.

Buying and selling earlier than the standard payoff time doesn't affect the math that informs the "payoff or invest" decision, aside from a shorter time period having more biases towards paying off for the guaranteed return.